Introduction
If you’re preparing for ACCA FFA (F3/FA/FFA), Chapter 6: Non-Current Assets: Acquisition and Depreciation is one of the most important topics in Financial Accounting. Understanding how assets are acquired, measured, and depreciated is essential for both exams and real-world accounting.
In this lesson, we explain the chapter in simple Nepali, based on the Kaplan Study Text, focusing on the key concepts, calculations, and common exam areas.
📚 What are Non-Current Assets?
Non-current assets are assets that a business intends to use for more than one accounting period. These assets help generate revenue over the long term and are not purchased for resale.
Examples include:
- Property
- Plant and Equipment
- Vehicles
- Machinery
- Office Equipment
🏗️ Acquisition of Non-Current Assets
When a business purchases a non-current asset, it must determine the total cost of acquisition.
The cost of an asset generally includes:
- Purchase price
- Import duties and taxes (if applicable)
- Delivery and transportation costs
- Installation costs
- Professional fees directly related to bringing the asset into use
Important Exam Point:
Only costs directly attributable to bringing the asset into working condition should be capitalized.
💡 Capital Expenditure vs Revenue Expenditure
Students often confuse these two concepts.
Capital Expenditure
Costs incurred to acquire, improve, or extend the useful life of an asset.
Examples:
- Purchasing machinery
- Upgrading equipment
- Major improvements
Revenue Expenditure
Day-to-day expenses incurred to maintain an asset.
Examples:
- Repairs
- Maintenance
- Routine servicing
Understanding this distinction is essential for ACCA exams.
📉 Depreciation
Depreciation is the systematic allocation of an asset’s cost over its useful life.
The purpose of depreciation is to:
- Match costs with revenue earned
- Reflect the reduction in value of assets
- Present more accurate financial statements
📊 Methods of Depreciation
1. Straight-Line Method (SLM)
The same amount of depreciation is charged every year.
Commonly used when the asset provides equal benefits throughout its useful life.
2. Reducing Balance Method (RBM)
A fixed percentage is applied to the asset’s carrying amount each year.
This method results in higher depreciation charges in earlier years and lower charges in later years.
🔍 Key Terms to Remember
Residual Value
The estimated value of the asset at the end of its useful life.
Useful Life
The period during which the asset is expected to provide economic benefits to the business.
Accumulated Depreciation
The total depreciation charged on an asset since its acquisition.
Carrying Amount
Cost of the asset minus accumulated depreciation.
⚠️ Common Exam Mistakes
- Including revenue expenditure in asset cost
- Forgetting residual value in depreciation calculations
- Using the wrong depreciation method
- Incorrectly calculating carrying amounts
- Mixing up capital and revenue expenditure
🎯 Why This Chapter Is Important
Non-current assets and depreciation are frequently tested in ACCA FFA exams. A strong understanding of these concepts will help you perform better in later topics such as disposals, revaluations, and financial statements.
🎥 Watch the Full Video
👉 [https://youtu.be/8_PVbIsJN8Y]
📺 Full ACCA FFA Nepali Playlist
👉 [https://www.youtube.com/playlist?list=PL6MketilTTIMVuMRUPkY1eAdlv_2d0HIY]
Follow the complete playlist to learn ACCA FFA step by step in Nepali.
📝 Conclusion
Chapter 6 provides the foundation for understanding how businesses account for long-term assets. Focus on acquisition costs, capital versus revenue expenditure, and depreciation methods. Regular practice and concept-based learning will help you score well in the ACCA exam.
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